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Internal Revenue Code]". Sec. 6662(c). Under the regulations,
negligence is "strongly indicated" where a taxpayer fails to
include on an income tax return an amount of income shown on an
information return. Sec. 1.6662-3(b)(1)(i), Income Tax Regs.
However, the accuracy-related penalty will not be imposed with
respect to any portion of an underpayment if it is shown that
there was reasonable cause and that the taxpayer acted in good
faith. Sec. 6664(c)(1). The determination of whether there was
reasonable cause and good faith "is made on a case-by-case basis,
taking into account all pertinent facts and circumstances." Sec.
1.6664-4(b)(1), Income Tax Regs.
The taxpayer's mental and physical condition, as well as
sophistication with respect to the tax laws, at the time the
return was filed have been considered in determining whether the
negligence penalty should apply. Gray v. Commissioner, T.C.
Memo. 1982-392; see also Carnahan v. Commissioner, T.C. Memo.
1994-163 (mentally incapacitated and disabled taxpayer was not
liable for various additions to tax including negligence), affd.
without published opinion 70 F.3d 637 (D.C. Cir. 1995).
It was Mrs. Ruckman who maintained the books and financial
records for both Ruckman, Inc., and petitioners personally, and
who provided the information to and consulted with petitioners'
accountant for purposes of his preparation of the tax returns of
Ruckman, Inc., and petitioners. Mr. Ruckman testified credibly
that he understood very little regarding petitioners' financial
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